Compute the portfolio expected return, Advanced Statistics

(a) You are trying to develop a strategy for investing in two different stocks, Stock A and Stock B. The anticipated annual return for a $1000 investment in each stock under four different conditions has the following probability distribution:

Returns

Probability Economic

        condition                     StockA            Stock B

0.1       Recession                -$50                 -$120

0.4      Slow growth               $20                   $0

0.4      Moderate growth       $80                  $140

0.1     Fast growth                $150                $250

Compute the portfolio expected return and portfolio risk if the percentage invested in Stock A is either 30%, 50% or 70%. On the basis of these results, which portfolio would you recommend? Briefly explain the reason for your answer.

b) In a triangle taste test conducted at a Woolworths supermarket, the taster is presented withthree samples, two of which are alike, and is asked to pick the odd one by tasting. If a tasterhas no well-developed sense of taste and picks the odd one by guessing,

(i) What is the probability that in six trials (ie. six taste tests) he or she will make at least one correct decision.

(ii) How many correct decisions would you expect in six trials (ie. six taste tests).

(c) A manufacturing plant's main production line breaks down an average of 2.4 times per day.

Assume breakdowns occur randomly.

(i) What is the probability of at least 3 breakdowns in a day.

(ii) How many breakdowns would you expect in seven days.

Posted Date: 2/25/2013 4:32:40 AM | Location : United States







Related Discussions:- Compute the portfolio expected return, Assignment Help, Ask Question on Compute the portfolio expected return, Get Answer, Expert's Help, Compute the portfolio expected return Discussions

Write discussion on Compute the portfolio expected return
Your posts are moderated
Related Questions
the problem that demonstrates inference from two dependent samples uses hypothetical data from TB vaccinations and the number of new cases before and after vaccinations for cases o

Hazard regression is the procedure for modeling the hazard function which does not depend on the suppositions made in Cox's proportional hazards model, namely that the log-hazard

Kaiser's rule is the  rule frequently used in the principal components analysis for selecting the suitable the number of components. When the components are derived from correlati

Standardise the following arguments, which involve counter-arguments Some educators have argued that the increasing use of the internet by children and teenagers will have a be

Ask questT-TEST? ion #Minimum 100 words accepted#

Lattice distribution : A class of probability distributions to which most of the distributions for discrete random variables used in statistics belongs. In such type of distributio

Treatment allocation ratio is the ratio of the number of subjects allocated to the two treatments in a clinical trial. The equal allocation is most usual in practice, but it might

Independent component analysis (ICA) is the technique for analyzing the complex measured quantities thought to be mixtures of other more fundamental quantities, into their fundamen


Paired samples are the two samples of the observations with the characteristic feature with each of the observation in one sample have only one matching observation in the other s